AMR Pilots to Vote on Contract Paring Cuts in Bankruptcy

By Mary Schlangenstein -
Jun 28, 2012

American Airlines unions won’t face
an immediate court ruling on whether their contracts can be
discarded after pilot leaders decided to let members vote on a
proposal that pared concessions sought by the bankrupt carrier.

The Allied Pilots Association board agreed yesterday to
hold the election, just before a deadline set by U.S. Bankruptcy
Judge Sean Lane in New York. The action prompted Lane to delay a
decision that had been set for tomorrow on whether to let
American make wage and work-rule changes that would help carve
$1.25 billion from annual labor spending, the airline said.

American’s 8,000 pilots will vote on a contract offer for
the first time since 2003, when they accepted concessions to
keep the AMR Corp. (AAMRQ) unit from seeking bankruptcy protection. If
pilots accept the $315 million in annual cost reductions,
American would move closer to its goal of emerging from court
protection as an independent carrier by securing the cuts.

“We are confident our pilots will carefully consider the
tentative agreement,” Bruce Hicks, an American spokesman, said
in a statement. “This is a critical step in American’s
restructuring.”

While five employee groups in the Transport Workers Union
have approved givebacks, two other TWU groups held out. Neither
the pilots nor flight attendants unions has accepted demands
from AMR, which earlier asked Lane to cancel its existing
agreements.

Delayed Decision

Lane will postpone his decision “on all the unions’
contracts” pending the pilot vote, Hicks said. ‘We must use the
additional time wisely to reach agreements” with the TWU and
the Association of Professional Flight Attendants, he said.

The judge won’t rule until Aug. 8 while pilots vote,
according to a message to APA members from a spokesman, Tom Hoban, on the union’s website. The APA board agreed by a 9-7
vote to offer the proposal to rank-and-file balloting, according
to a union e-mail.

In the background is US Airways (LCC) Group Inc., whose interest
in a merger with AMR has led to provisional contract agreements
with pilots, TWU and the APFA. AMR, which filed bankruptcy on
Nov. 29, is resisting the overtures, though it has agreed to
consider alternatives to its stand-alone plan. US Airways, based
in Tempe, Arizona, hasn’t made a formal bid.

The AMR offer that will be sent to pilots includes a 15
percent reduction in the value of concessions originally sought
by the airline. It also contains furlough protections, a 14.8
percent compounded pay raise over a six-year term and a 13.5
percent stake in the reorganized airline.

Small Jets

American would gain a more liberal policy to enter
marketing agreements with other carriers, a new method of
linking pay and aircraft flown, and the ability to use
additional small jets.

A decision by Lane to void current contracts would let
American change wages and work rules immediately and would put
the unions’ bankruptcy claims at risk. The airline and labor
groups still would have to negotiate for longer-term contracts
that would remain in place once the carrier leaves court
protection.

The agreement should make APA the largest stakeholder in a
restructured AMR and allow the union to influence decisions by
the company’s creditors committee, APA President David Bates
told members in a statement.

“The tentative agreement represents a form of insurance
that limits our downside risk while ensuring that we have a
significant voice in the direction of American Airlines going
forward,” he said in a message on the union’s website.

Flight attendants and TWU-represented mechanics and
aircraft stock clerks are set to resume talks with American next
week.

The case is In re AMR Corp., 11-15463, U.S. Bankruptcy
Court, Southern District of New York (Manhattan).